Contractors Insurance No Comments

Building contractors get to enjoy relative independence compared to most other professions, but this independence does not come without inherent risks. Contractors must be prepared to take steps to define responsibilities and liabilities along with precautions to reduce the overall number of risks to which they expose themselves. Here are some methods many professionals in the industry use.

Putting the “Contract” in Contractor

The term “contractor” may now be a synonym for independent builder, but the etymology of the word should indicate how this relationship is allowed to function. Every job or employer should be accompanied by a new contract. This contract should outline crucial details like:

  • A comprehensive description of work to be performed
  • Project deadlines
  • Quality standards
  • Payment procedures
  • Indemnification agreements

The last point is the most crucial one. Indemnity is a security against loss, for example, ensuring the contractor is exempt from legal responsibility for his or her actions. In other words, it serves as insurance. Contracts will often specify the types of insurance required, but indemnity agreements also encompass known areas of risk and where liability will land based on those risks.

For example, a structure that was not built up to code may be in danger of collapsing no matter how skilled a contractor is renovating it. Indemnity agreements preemptively assign responsibility in scenarios like these to prevent blame improperly falling upon parties undeserving of the consequences.

Contractors Insurance

The most effective means of protecting against risk is to have contractors insurance. The policy should cover assets, work performed, liability and workers’ compensation. Contractors should carefully read the declarations section of their policy to see word-for-word what is covered. They should also be certain to scan the exclusions section in order to determine the situations that will not be covered.

Follow OSHA and Building Codes

In the past, mistakes were made that cost workers their lives and property owners their valuable assets. Such mistakes led to the implementation and enforcement of government regulations to avoid future problems.

Worksite code governs how employees are treated and how dangerous conditions are addressed, dictating safety standards and procedures. Following these guidelines helps remove liability risk, although it cannot negate risk entirely.

Similarly, building codes exist to protect property owners from issues like faulty wiring, structural collapse, toxic fume exposure and other problems that could occur from work performed. Without regulation, asbestos ceilings and lead-based paint would still be commonplace. Since no one construction worker is a structural engineer, an electrical engineer, a chemist, a physicist or a doctor, building codes help prevent dangerous mistakes that might unintentionally occur.

Subcontractor Diligence

Just as the property owner or the project manager wants to avoid assuming risk from contractors, contractors who hire out subcontractors should ensure that they will not be held accountable for actions performed by the subcontractor. Subcontractor contracts must be drafted and reviewed just as carefully as initial contracts, and these parties should carry their own insurance in most instances.

Those hiring subcontractors are still obligated to practice due diligence, in the sense that they must screen for subcontractors that have the knowledge and experience to perform the work according to the standards laid out in the initial contract.

Use the Knowledge of People Who Understand Risk the Best

Review your risk portfolio with an insurance agent to become aware of common risks and liabilities associated with your profession. Agencies can provide resources like safety manuals and inform you of common risk scenarios. They can also recommend legal counseling so that contracts will not place undue burdens on any parties, especially yours.

Practices like this may seem like a headache, but they can prevent even worse headaches from occurring down the line. By exercising risk management practices, you can rest assured that if something goes wrong, no one will unjustly take the fall for someone else.